SHANGHAI (Reuters) — Chinese lawyer Hao
Junbo wants to make you rich if you're a whistleblower after a
bounty. For big business in China he's a headache, part of a small
but fast-growing industry built around exposing corporate
wrongdoing.

The U.S. Securities and Exchange Commission received a tip-off a
week from China last year, double the year before and five times
more than in 2011. The attraction is a recently bulked up offer for
as much as 30 percent of any fine if new information leads to the
recovery of investor money over $1 million. Last year, one Wall
Street whistleblower pocketed $14 million.

The SEC is just one of many channels for this new breed of Chinese
whistleblowers whose information has helped lead to investigations
in China of firms including British drugmaker GlaxoSmithKline Plc <GSK.L>
and French dairy Danone SA<DANO.PA>.

"It can't be denied that the financial benefits are an important
incentive," said Hao, a Beijing-based whistleblower lawyer. Hao
advertises online for whistleblowers to get in touch for the chance
to "uphold justice and win a huge bounty too", though he concedes he
is yet to collect a reward.

Hao said signs of stronger government support for Chinese
whistleblowers had helped the sector come out into the open, with
150,000 tips investigated by authorities last year. But there is
still a way to go to catch up with the well-established
"no-win-no-fee" lawyers in the United States and Europe.

Indeed, blowing the whistle in China can be a risky proposition,
with those who come forward often facing a backlash from the local
officials or businesses they accuse.

"Because some clients don't want to reveal their identity, they hire
us lawyers to blow the whistle on their behalf," said Hao. His cut
is a negotiated slice of any final bounty.

JOINING BATTLE

Whistleblowers in China have become more daring, lawyers and
business people said, creating a tougher environment for companies,
especially in sensitive sectors like pharmaceuticals where there
have been a spate of probes against corporate corruption.

"At this point almost every pharmaceutical company is looking at
their internal rules and procedures and whether they are being
complied with. It is industry-wide," said Shanghai-based lawyer John
Huang, co-founder and managing partner at MWE China, which helps
firms negotiate with whistleblowers.

Huang said the firm had seen whistleblower-related cases double over
the last year, adding companies are launching internal
investigations, seeking legal assistance and training to deal with
issues such as dawn police raids and staff being arrested after
insider tip-offs.

Companies have also recruited law firms, investigators and
compliance experts to stop potential whistleblowers from reporting
externally, attempting to defuse the situation in-house before it
sparks a wider probe.

It doesn't always work out and falling foul of a whistleblower can
have a serious impact.

GSK's China sales plunged after police accusations that it funneled
up to 3 billion yuan ($482.99 million) to travel agencies to
facilitate bribes to doctors and officials to boost its drug sales.

The investigation was sparked by at least one high-ranking
whistleblower, a person with direct knowledge of that investigation
told Reuters. The person declined to be identified because of the
sensitivity of the case.

"Whistleblowers are quite normal in China. In a place like this
there are always some people like that involved because of personal
interest — they're unhappy with their experience or have conflicts
with others in the company," the person said.

GSK declined to comment.

China's leaders have also put their weight behind the
anti-corruption crackdown, with President Xi Jinping calling on
Chinese officials to "sweat" corruption out of the system. Firms in
sectors from energy and autos to food and healthcare have come under
the spotlight.

China's disciplinary watchdog also launched an online portal to
encourage whistleblowers this month. The site allows people to view
cases by region and gives them as easy way to make their own
reports.

There is a small network of lawyers in China and even overseas to
encourage and direct whistleblowers in the country, while official
channels have been set up to uncover officials' bad behavior at
state-owned enterprises and within government.

Activists have also set up forums for whistleblowers to interact,
such as the popular 'People Supervision Net', a muckraking portal
headed by prominent Chinese whistleblower Zhu Ruifeng.

"You can find law firms, accounting firms and consultants who have
built up businesses around being the 'shepherds' for whistle
blowers, helping guide them through the process, and obviously the
incentive is the financial reward," said William McGovern, Hong
Kong-based partner at law firm Kobre & Kim and a former SEC
enforcement attorney.

The lawyers guide potential whistleblowers to collect the
information needed to report to the SEC, which leads U.S.
investigations against corruption and corporate malpractice. U.S.
companies operating in China and Chinese firms with U.S. stock
exchange listings are also subject to SEC oversight.

As part of the 2010 Dodd-Frank legislation on Wall Street reforms, a
whistleblower can receive a bounty of up to 30 percent as long as
the amount recovered is at least $1 million.

Bounties under earlier programs focused on insider trading and were
far smaller, meaning few experts were on hand to help the few
whistleblowers from China who did want to report. Now legal experts
help get everything in order — for a share of the profits, several
former SEC lawyers said.

"The difference now is that everything has been packaged very well
with binders, tagged, invoiced and with documents that clearly come
from a company, which make it very easy for the government to then
build a case," said Nat Edmonds, partner at law firm Paul Hastings
and former Foreign Corrupt Practices Act (FCPA) litigator at the
U.S. Justice Department.

The SEC declined to comment.

FROM TEXAS TO CHINA

Some U.S. lawyers are jumping into the fray.

Jason Coomer, who heads a small practice in Austin, Texas, has a
Chinese language website offering assistance to whistleblowers. His
office has received around 25 whistleblower reports from China in
the last two years and is now taking two cases forward to the SEC.

"We're talking large multinational corporations with multi-billion
dollar contracts each year. The whistleblowers are insiders at the
corporations and have witnessed elaborate bribery schemes," he told
Reuters in on telephone interview from Texas. He declined to give
further details about the cases.

Whistleblowers from China first make contact online before sending
packages of documents to his firm, he said. Chinese-speaking lawyers
then translate and unpick the contents, before deciding whether the
case can be taken further to the SEC.

The rise of this whistleblower industry — both fighting for and
against corporations in China — raises a serious new hurdle and
cost, lifting the chances of malpractice coming to light and the
potential million dollar fines that follow. German engineering firm
Siemens AG <SIEGn.DE> was hit by a record $800 million FCPA fine in
2008.

"If you type 'FCPA' in Google or Bing in China now, the first thing
that comes up on the adverts is whistleblower lawyers," said lawyer
Edmonds.